Foreign Investments Trigger Widened Deficit

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  • TEMPO.CO, Jakarta – Aviliani, an economist from the Institute for Development of Economics and Finance (Indef), said Thursday too many foreign direct investments (FDI) to Indonesia will potentially widen the country’s deficit. 

    The government has to be careful in inviting FDIs because too many FDIs will trigger significant import. “FDIs affect increase in imports. The more we invite FDIs, the more we import.” 

    She said the government had to find a way to boost exports so as to avoid excessive imports. “If exports are not increased, we will not gain foreign exchange,” she said, adding that the lack of foreign exchange would weaken the rupiah. 

    The government seeks to achieve a 7 percent economic growth by increasing FDI. Coordinating Economic Minister Sofyan Djalil has pledged streamlined bureaucracy for investment permits and power availability. “We hope we will have more FDIs and the economic target is achieved,” he said. 

    The Investment Coordinating Board (BPKM) recorded in the last five years during Susilo Bambang Yudhoyono's administration that investments had achieved an average growth of 28 percent, comprising 69.2 percent of FDIs and 30.8 percent of domestic investments. 

    Investment growth until the end of 2014 is predicted to only reach 14.6 percent, or down from 27.3 percent in 2013. During the SBY administration, the highest recorded investment was in 2010 with 51.9 percent. Until the end of this year, the total investment is estimated to reach Rp456.6 trillion. 

    Farah Ratnadewi Indriani, BKPM’s deputy for investment climate development, said the government targeted an annual growth of 15.4 percent, consisting of 63.7 percent of FDIs and domestic investments at 36.3 percent. “In 2019, the total investment is targeted at Rp933 trillion,” said Farah. For next year, the government aims at investments of 519.5 trillion or up by 13.8 percent. 

    President Joko Widodo has required all regional governments to have one-roof services in license processing to improve investment climate in regions.